Half year results

RNS Number : 2891J

essensys PLC

09 April 2020

 

9 April 2020

essensys plc

("essensys" or the "Group")

Half year results for the six months ended 31 January 2020

Strong first half performance underpins Group resilience

Following its trading update on 24 March 2020 and revised guidance from the Financial Reporting Council (FRC) and the Financial Conduct Authority (FCA), essensys plc (AIM:ESYS), the leading global provider of mission critical software-as-a-service (SaaS) platforms and on-demand cloud services to the flexible workspace industry, announces unaudited results for the half year ended 31 January 2020.

Financial summary:

£m unless otherwise stated	Six months to January 2020	Six months to January 2019	Change
Revenue	11.4	9.6	+19%
Recurring revenue1	9.7	7.5	+29%
Run Rate Annual Recurring Revenue1	19.7	15.4	+28%
Statutory (loss) before tax	(0.1)	(0.4)
Adjusted EBITDA 1	1.9	2.1	-10%
Adjusted EBITDA margin	16.7%	21.9%
Profit before tax (pre IPO costs & share based payment expenses) 2	0.2	0.6	-67%
Profit / (loss) per share (pence)	(0.2)p	(1.0)p
Cash	1.7	2.73

¹ See CFO Review below for description and breakdown

² Profit before tax adding back IPO related costs and share based payment expenses

³ As at 31 July 2019

Operational highlights:

· Strong Group performance in first half; US remains major growth driver

o  Customers continue to grow site numbers in existing and new geographies

o  Increased demand within our target market resulting in addition of 23 new customers so far

o  400 Connect sites live at January 2020, up 32% year on year

· Continued investment to support long-term growth

o  Development of new products, services and unified platform to drive increased cross and up-sell

o  Increased reach, capacity and capability of essensysCloud

o  Expansion activity within North America & Europe continues
 

· Scale up of UK based R&D team to accelerate delivery of product roadmap

· Strengthened board with appointment of global real estate leaders

· Structural drivers and growing occupier awareness have led to an increasing number of global landlords and commercial real estate (CRE) companies entering the market

Financial highlights:

· Revenue and underlying profits in line with management expectations

o  Revenue up 19% year on year

o  Recurring revenue up 29% representing 85% of total revenue (H1 2019: 78%)

o  Group Annual Recurring Revenue ("ARR") gross margin of 70% (H1 2019: 69%)

· US recurring revenues up 52% and continue to grow strongly; US business now larger than the UK in Connect site numbers
 

· As planned and previously reported lower Adjusted EBITDA than H1 2019 reflects investment in sales and marketing, product development and geographic expansion to support long term growth
 

· Strong cash generation; debt-free; undrawn revolving credit facility

Impact of and response to the Covid-19 virus outbreak:

· Subsequent to the conclusion of the first half of its financial year and following the recent escalation of governmental responses to Covid-19 and the possible impact on the Group and its customers, the Group has taken the following measures to protect the business and its personnel and to reduce operating costs and associated cash requirements:

o  All personnel are now working from home;

o  20 of the Group's UK personnel have agreed to be placed on Furlough Leave;

o  All other Group employees have agreed to reduced working hours and pay;

o  Members of the Board and the Group's senior management have all agreed to substantial pay reductions;

o  The Founder and Chief Executive, Mark Furness, has agreed to waive his salary for at least three months;

o  The Group has activated an option to reduce near term expenditure with its outsourced software development provider;

o  Any additional non-essential capital or operating expenditure has been paused, as has all recruitment;

· The Group had secured its supply chain requirements for its contracted and anticipated demand for Connect sites prior to the recent government restrictions and continues to work with its supply chain to obtain deferred payment terms and service credits, where possible.
 

· The Group intends to take advantage of appropriate governmental support schemes where appropriate both in the UK and US, including the deferral of tax payments.
 

· The Group had £1.7m of cash reserves at January 2020 and retains an undrawn revolving credit facility of £1.0m.

· The Group has entered into a £1.3 million unsecured loan agreement (the "Loan Facility") with the Group's founder, Chief Executive Officer and largest shareholder, Mark Furness.  The Loan Facility, which may be drawn down by the Company in part or in whole, has been made available by Mr Furness in the event that the Group requires additional liquidity as a consequence of the potential impact of the Covid-19 pandemic on the Group's business.  Further details of the Loan Facility, which is a related party transaction under the AIM Rules for Companies, are set out below.

·     Subsequent to its trading update on 24 March 2020, the Group has seen a number of requests for support from its customers and is considering those on a case-by-case basis in light of its commitments to all customers and the impact on its business.  The Group has seen some, albeit modest, reduction in marketplace utilisation to date.
 

· The Group has 'stress tested' the business under a number of scenarios and identified a number of additional actions that can be taken should either the current restrictions or the virus' negative economic impact continue into FY21.

Current trading and outlook:

· The second half of the year started well with trading in line with expectations as customers continued to deliver contracted Connect sites as planned.  The Group has good pipeline visibility with 51 new Connect sites contracted for delivery post half year end.  In light of the Covid-19 outbreak, a number of these customer site openings have been delayed; however, the Group has delivered 15 of these sites since the half year end and currently expects to deliver a further 20 over the second half of the financial year, predominantly in the US.

· The Board continues to monitor the impact of Covid-19 on the business and is in particular focussed on the key risks of: delays by customers in activation of existing contracted sites; near term delays in customer contracting decisions in respect of new sites; potential reduction in marketplace service utilisation; and the impact of the current situation on the financial stability of customers.

· Cost savings implemented to date, together with other cash conservation measures and visibility over planned new Connect site openings, mean that, as matters stand, the Board remains positive as to prospects for the remainder of FY20, albeit the Board acknowledges that this could rapidly change in what is a fast-moving situation. In this regard, it is too early to reliably assess the impact of the current situation on the Group's financial performance beyond the financial year-end.

· Notwithstanding the Covid-19 outbreak, the Group's sales pipeline remains strong and includes a number of significant future opportunities; an increasing number of which derive directly from property owners and the wider CRE (commercial real estate) market.  This coupled with the high proportion of contracted recurring revenues underpins the Board's confidence in the resilience of our business model and the long-term growth of the business.

Mark Furness, CEO of essensys, said:

"Our strong first half and performance since the period end puts essensys in good stead to withstand any disruption caused by the COVID-19 outbreak, and we continue to closely monitor developments to ensure we maintain operational resilience and protect long-term value.

"Notwithstanding the current situation, our strong pipeline of activity, continued market penetration and the mission critical nature of our software and services to our customers' operations underpins the Board's confidence in the long-term growth prospects for the Group."

For further information, please contact:

essensys plc		[phone]
Mark Furness, Chief Executive Officer
Alan Pepper, Chief Financial Officer
N+1 Singer (Nominated Adviser and Broker)		[phone]
Peter Steel / Harry Gooden / George Tzimas / Harry Mills
FTI Consulting
Jamie Ricketts / Ellie Sweeney / Debbie Oluwaseyi Sonaike / Talia Jessener		[phone]

About essensys plc

essensys is the leading global provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry.  essensys' software is specifically designed and developed to help solve the complex operational challenges faced by multi-site flexible workspace operators as they grow and scale their operations. The Group's technology allows operators to deliver a range of differentiated, flexible and customer-specific services to a broad base of tenants across multiple locations and helps operators to manage the cost, operational and technological challenges they typically encounter.

essensys' two SaaS platforms, Connect and Operate, address these complex operational challenges, and reduce costs by simplifying the day-to-day management of flexible workspaces and the provision of on-demand IT, technology and infrastructure services to tenants. essensys' platforms automate key tasks and processes and help flexible workspace providers deliver highly efficient, customer-centric workspace solutions and member experiences with enterprise class services.

Chief Executive Officer's Report

Following our successful listing on AIM in May 2019 and the Group's maiden results for its 2019 financial year I am pleased to report continued growth and performance in line with our expectations in the half year to January 2020.  As previously reported in our trading update on 24 March 2020, the first half of the year delivered growth from existing customers, new customers, new product feature launches and further geographical expansion.

Covid-19

We have started to see an impact of the Covid-19 virus outbreak on our customers, albeit there has been limited direct impact on the Group to date.  We have implemented our business continuity plan and all Group employees are now working remotely (wherever they are based in the world).  We saw the potential for supply chain issues from Covid-19 earlier in 2020 at which point we secured our supply chain to ensure that we can deliver on our contracted commitments and anticipated future demand in the short to medium-term, and continue to monitor that.

Subsequent to the imposition of government mandated movement restrictions and the impact on levels of customer facing activity within the business we have implemented a number of cost saving and cash conservation measures.  These include:

· Taking advantage of the UK Government Coronovirus Job Retention Scheme, placing 20 of our UK workforce on Furlough Leave until the end of May in line with scheme's current arrangements;

· Implementing reduced working hours across the rest of the business, with a commensurate reduction in salaries;

· Senior management taking a substantial pay reduction for the period;

· I have waived my salary for the current quarter;

· Reducing expenditure with the Group's outsourced software development provider;

· As would be expected we have deferred all non-essential capital and operating expenditure and all new recruitment activity has halted.

Following the previous engagement with our supplier base to ensure continuity of supply for new Connect sites, we are now engaged across our wider supplier base to reduce costs where possible and arrange deferred payment terms.  We continue to investigate other areas of financial support, where appropriate, including taking advantage of any government support schemes and tax payment deferrals.

Since our recent trading update we have a seen a number of deferrals to existing site opening plans.  To date these deferrals have been for a number of weeks and we have not seen any requests for cancellation as yet.  As expected, we have seen a significant slowdown in new business activity but nevertheless continue to sign new business.  The impact on our own customer base has become evident in the last two weeks and we are monitoring this closely to minimise the impact on the Group.  Any direct impact on the Group should, however, be limited in the short-term with most of our income fixed and contracted.  We are monitoring customer performance closely to minimise any potential disruption.

Our software and services remain critical to the continued operation of our customers sites and are also key to enabling remote working for many of their clients, and so we continue to look at ways to provide additional support during the crisis. To date we have implemented a number of initiatives which are helping our clients manage their business remotely and provide additional support to their customers, including providing free of charge access to a number of remote working tools such as our Softphone and call handling software and also VPNs and remote network access.

We have cash reserves and have "stress-tested" the business to ensure that we will be able to deal with any significant impact on both our existing business and to our future growth over the next twelve to eighteen months should that become necessary.  Notwithstanding the current situation we remain convinced of the long-term structural move to a more flexible and "amenity-rich" working environment, continue to see significant large enterprise adoption together with increasing levels of landlord market entry to the market.

Continued revenue growth

The growth in the number of Connect sites and in Operate pricing reported at the year end to July 2019 continued into FY20 with recurring revenue for the half year up 29% on H1 19 to £9.7m.  Run rate Annual Recurring Revenue (ARR) was £19.7m at January 2020, up 28% from H1 19.  Operate revenue also grew 29% year on year.

FY19 was our best year for the expansion of the Group's customer base with 39 new customers added and this momentum continued into FY20 with contracts signed already this year with another 23 new customers.  Our pipeline of potential new customers in both the UK and the US continues to grow and we see increasing numbers of traditional real estate investors, landlords and commercial real-estate (CRE) companies actively looking to enter the flexible workspace market.  Engagement with larger, established, multi-site flexible workspace operators has also increased following our accelerated investment into product development and our go-to-market strategy, post IPO.

Connect sites grew to 400 at the half year, an increase of 97 from January 2019 (32%), of which 38% came from new customers.  Growth in North America continues to be strong with the site numbers in the US now exceeding those in the UK.

Looking ahead, we have contracted commitments for a further Connect 51 sites post 31 January 2020, of which around half are with customers who were not customers of the Group at January 2019.  We anticipate growing further with these new customers in coming years.

Continued progress with Operate and cross sell opportunity

Our repositioning of Operate towards our core target market of multi-site operators during FY19 continued into the early part of H1 and is now close to being complete.  That strategy has continued to deliver results with a 29% year on year increase in Operate revenue and a 6% net increase in number of customer locations.  Particularly pleasing is the expansion of this side of the business internationally which is now c. 9% in the non-UK EMEA area - most notably in France.  This is adding to the impetus of our mainland Europe expansion strategy, particularly with Connect.

Geographical expansion

Following the establishment of our West Coast USA operation in the latter half of FY19, the first half of FY20 saw the expansion of the essensysCloud private network to better serve the Canadian market with new datacentre locations added in Seattle and Toronto.  We are now in the process of formally establishing a Canadian business to support a growing customer base and continue to assess our geographic reach capabilities within the US market.  We anticipate further expansion into the southern US within the next 12 months as we support customer growth and increased demand.

Our pipeline of potential customers in mainland Europe continues to grow, particularly with large real estate companies.  As reported at the last full year-end we have the technical capability to service these markets from the UK and anticipate seeing significant movement in this area over the next twelve months.

Further afield, we are undertaking initial due diligence for entry into the Asia Pacific market; however, recent developments regarding the Covid-19 virus outbreak have delayed activity here and we would anticipate returning to this when conditions permit.  That said, we have existing customer demand for the APAC region and have plans in place to support their growth and will react to this demand as and when opportunities arise.

Product development

Our investment in product development is delivering increasing returns and customer value with new product feature launches to support occupier mobile experiences, complex business models (e.g. franchising), and general performance improvements all taking place in the first half of the year.  In addition to increasing its capacity and geographic reach, we have further extended the essensysCloud capability to directly link to the major global cloud service providers (including Dropbox, Amazon, Microsoft and Google), providing faster, secure, "on-net" access to a significant number of hosted software platforms.

We are currently in the final testing phase, prior to "beta" customer launch, of our new Smart Access module of Connect.  Designed and developed from the ground up to meet the complex and specific requirements of the flexible workspace industry, essensys Smart Access will eliminate significant friction in many parts of the occupier experience.  Whether unlocking doors, tapping to book and access meeting rooms, or providing a seamless book/pay/use experience for a wide range of services, Smart Access will support millions of dynamic access rules for any type of occupier - be they member, tenant, or visitor - in real-time and securely delivered via essensysCloud.  General release of Smart Access is expected for Connect customers in Q4 FY20.

Following on from the launch of Smart Access, we are in the final stages of localisation of both Connect and Operate which will primarily support our expansion into mainland Europe.  Additional modules are also in development, in particular digital signage and secure print management solutions.  Development of the unified essensys software platform is progressing well and this is expected to be launched in the second quarter of calendar year 2021.

In the past year we have increasingly noted that traditional landlords are trying to respond to occupier demand for more flexible, responsive and agile real-estate solutions without the technology or software in place to enable or manage this.  To support this growing part of the industry we have developed a specific solution - essensys Landlord Edition - which provides a suite of software and easily scalable technology (from our existing Operate and Connect platforms) that landlords can use to enable more flexible use of their buildings.  We anticipate launching this new, targeted, proposition within the next month.

Immediately prior to our IPO we established an outsourced external offshore development centre in Vietnam to accelerate software development.  Having made good progress on our short-term goals with that facility, we have reviewed our development capability and made the decision to relocate the research, development and prototyping element of that team back to the UK.  This will increase the speed and efficacy with which we can design and develop new product.  That decision has been aided by the increased profile of the business since IPO, the increasing developer awareness of "proptech" and the ongoing expansion and opportunities afforded by the continued growth of the Group globally.  We will continue to maintain an element of the offshore facility to undertake routine, programmed development work, albeit at a reduced level following additional reductions as part of our Covid-19 mitigation actions.

Market overview and outlook

We continue to see expansion in the market as the long-term structural drivers behind the growth in the overall flexible workspace sector continue to develop and take effect.

Recent industry commentary now suggests that the US is the largest market for flexible workspace globally, albeit still at less than 1% of the total commercial office space market.¹  When compared to 7% market penetration in the UK this supports our view that the US market, and our opportunity there, still has very significant potential for long-term growth.  Expansion in the UK also continues with 10.5% growth in flexible workspace providers in 2019²   as does that in the wider EMEA region; the latter from a much lower base - underlying another area of market opportunity.

As highlighted above, we continue to see mainstream real estate companies enter the market as well as growth in larger, established, operators both within their existing markets and, increasingly, internationally.

The flexible workspace industry has historically thrived in times of economic uncertainty and it is our view that continued uncertainty around the ultimate outcome of Brexit will fuel growth in the sector, on both sides of the English Channel.  It is, however, challenging to assess the long-term impact of the Covid-19 virus on the flexible workspace sector.  Our immediate view is that the medium-term impact will be neutral and in the long term it may result in accelerated enterprise adoption of flexible workspace solutions which will, in turn, lead to further opportunity for the Group, however we do expect uncertainty within the flexible workspace market in the short term. 

¹ Instant Offices, US Market Report, 2019

² Instant Offices UK Market Report, 2019
 

Current trading and outlook

The second half of the year started well with continued growth in customers, sites and revenues and we remain optimistic for the future.  We are only starting to see the impact of the Covid-19 virus outbreak but still anticipate delivering a number of additional new Connect sites over the balance of the financial year. 

Our customers continue to have new site requirements and the small number of contracted but delayed sites are expected to go live later in the year.  Recent trading has been in line with expectations and, with a further 20 Connect sites scheduled for delivery over the balance of the financial year, we remain optimistic about this year's outcome, albeit the Board acknowledges that this could rapidly change in what is a fast-moving situation.

Our pipeline of activity, continued market developments and customer reaction to our product developments mean that the Board and management remain confident for the long-term growth prospect for the Group.

Mark Furness

Chief Executive Officer

8 April 2020

 

Chief Financial Officer's Report

This is the first interim report issued by essensys plc as a public company following the Admission to trading on AIM on 29 May 2019 (the "IPO").  The comparative period to 31 January 2019 was for the Group prior to the corporate reorganisation undertaken as part of the preparations for the IPO.  Following a minor change in accounting treatment for the full year to July 2019 in accordance with the requirements of IFRS15, comparatives for the period to January 2019 have been adjusted accordingly and therefore differ slightly from those published in the Group's Admission Document related to the IPO (total impact £0.1m reduction in Administrative Expenses and consequent reduction in Loss before taxation).

Financial Key Performance Indicators

£'m unless otherwise stated	Six months to January 2020	Six months to January 2019	Change
Group Total Revenue	11.4	9.6	+19%
UK	6.6	6.3	+5%
USA	4.8	3.3	+45%
Recurring Revenue1	9.7	7.5	+29%
UK	5.9	5.0	+18%
USA	3.8	2.5	+52%
Recurring Revenue %age of Total	85%	79%
Run Rate Annual Recurring Revenue1	19.7	15.4	+28%
Non-recurring revenue	1.7	2.1	-19%
Product Revenue
Connect	10.5	8.9	+18%
Operate	0.9	0.7	+29%
Gross Profit	7.2	5.9	+22%
Gross Profit percentage	63%	61%
Recurring Revenue margin %age	70%	69%
Statutory (loss) before tax	(0.1)	(0.4)
Adjusted EBITDA2	1.9	2.1	-10%
Adjusted EBITDA margin	17%	22%
Profit/(loss) before tax (pre IPO costs  & share based payments)	0.2	0.6	-67%
Cash	1.7	2.73

¹ See Revenue section for explanation

2 See Adjusted EBITDA explanation below

³ As at 31 July 2019

Revenue

Group total revenue grew by 19% from H1 FY19 to £11.4m in the year primarily as a result of continued growth in Connect sites mostly in the US where sites grew by 55% to 199 (from 128 at 31 January 2019).  Following the reduction in Operate site numbers during FY19 as the product was repositioned, Operate site numbers grew 6% and revenue grew 29% year on year.

Recurring revenue comprises income invoiced for services that are repeatable and consumed and delivered on a monthly basis over the term of a customer contract.  Run Rate Annual Recurring Revenue (Run Rate ARR) is an annualisation of the recurring revenue for the month identified (January 2020); is an indication of the annual value of the recurring revenue for that month and is used by management to monitor long term revenue growth of the business.

Recurring revenue grew by 29% driven by the increase in the number of sites (both Connect & Operate) and continued pricing increases in the Operate business and grew as an overall percentage of revenue.  Run Rate ARR grew 28% year on year to £19.7m again driven primarily by the overall increase in Connect sites by 32% to 400 at 31 January 2020 (2018: 303).

Gross margins

Gross margins increased slightly year on year primarily as a result of increased recurring revenue margin in both the UK and the US and in both Connect and Operate.  We continue to see cost reductions in the UK resulting in recurring revenue margin growth and continue to see increases in margins on recurring revenue in the US.

Administrative expenses

Excluding depreciation charges administrative expenses grew by £1.7m year on year in line with the Group's strategic plans and management expectations.  This was primarily driven by increases in staff costs resulting from increases in overall headcount, and the strengthening of the senior management team that took place during the latter part of 2019, in part immediately prior to the IPO.  In addition, the Group increased marketing expenditure in the latter part of 2019 and this continued into the first half of 2020.

Statutory (loss) for the half year

The Group incurred a £0.1m statutory loss for the half year to January 2020 (H1 FY19: loss of £0.4m), analysed as follows:

£'m	H1 FY20	H1 FY19
UK (including Group central costs for H1 FY19)	1.2	0.4
US	0.4	0.2
Central costs (in UK in H1 FY19)	(1.4)	-
Profit before tax (pre IPO costs and share based payment expenses)	0.2	0.6
Pre-IPO Share based payment expense	-	(0.7)
Post-IPO Share based payment expense	(0.3)	-
IPO Costs	-	(0.3)
Loss before tax for the period	(0.1)	(0.4)

Following the IPO and year end, Group central overhead costs are borne by the Company and shown separately above for H1 FY20.  For the comparative period of H1 FY19, central overhead costs were borne by the UK business and included within the profit for that business.

The Pre-IPO Share based payment expense relates to share options in essensys (UK) Limited that were in existence prior to the IPO which vested and were exercised immediately prior to the IPO.

Adjusted EBITDA

As previously reported, adjusted results are prepared to provide a more comparable indication of the Group's core business performance by removing the impact of certain items including pre-IPO costs and share based payment expenses (material and non-recurring), and other, non-trading, items that are reported separately. Adjusted results exclude adjusting items as set out in the statement of consolidated income and below, with further details given in the notes to the unaudited interim financial information below.  In addition, the Group also measures and presents performance in relation to various other non-GAAP measures, such as recurring revenue, run-rate annual recurring revenue and revenue growth. 

Adjusted results are not intended to replace statutory results.  These have been presented to provide users with additional information and analysis of the Group's performance, consistent with how the Board monitors results.

Adjusted EBITDA (being EBITDA prior to IPO costs and share based payment expenses) is calculated as follows:

£'m	H1 FY20	H1 FY19
Operating Profit / (loss)	0.0	(0.2)
Add back:
Depreciation & Amortisation	1.6	1.3
EBITDA	1.6	1.0
Add back:
Share Option Charge	0.3	0.7
IPO related costs	-	0.3
Adjusted EBITDA	1.9	2.1

Adjusted EBITDA for the half year was down from FY19 by 0.2m due to the full period effect of increased investment in sales and marketing, product development, the expansion of the Group's US operations together with the strengthening of the Group's management and functional leaders in advance of the IPO. 

Taxation

The Group incurred a small tax expense in the half year as a result of non-profits related tax charges in the US.

Cash

Net cash at half year end was £1.7m, in line with management expectations.  The Group continues to maintain sufficient cash reserves to fund its working capital requirements, planned product and software development together with any expected short-term geographic expansion.  In addition, the Group maintains an existing standby revolving credit facility that it is in the process of increasing in the event any particular opportunity arises that would require additional funding.

In light of the current, Covid-19, situation the Board has considered a number of different scenarios regarding trading and financial performance over the balance of this financial year and into FY21 and is confident that it maintains sufficient cash resources in the event of a significant, long term, impact on the Group.

Related Party Transaction

The Company has today entered into a £1.3 million unsecured loan agreement (the "Loan Facility") with the Company's Chief Executive Officer and largest shareholder, Mark Furness.

The Loan Facility, which may be drawn down by the Company in part or in whole, has been made available by Mr Furness in the event that the Group requires additional liquidity as a consequence of the potential impact of the Covid-19 pandemic on the Group's business.

Interest is payable on the principal amount of the Loan Facility outstanding at the rate of 4.5% per annum. If there is any default in repayment of the Loan Facility, interest is payable on the principal outstanding at the rate of 7.0% per annum.  The Loan Facility is unsecured and subordinated to the Company's senior lender, Wells Fargo.

The redemption date for the Loan Facility is 31 July 2021 although it may be prepaid, fully or in part, at any time before that date without penalty.  The Loan Facility is also subject to customary events of default.  In addition, in the event that Mr Furness subscribes for new ordinary shares in the capital of the Company, any amount drawn under the Loan Facility (together with accrued interest) shall become immediately repayable or, if no drawdown has been made, the Loan Facility will terminate.

As Mr Furness is a substantial shareholder and Chief Executive Officer of the Company, the Loan Facility constitutes a "related party transaction" pursuant to Rule 13 of the AIM Rules for Companies. The independent directors of the Company, being Charles Butler, Jon Lee, Alexandra Notay, Alan Pepper and Elizabeth Sandler, consider, having consulted with N+1 Singer Advisory LLP, the Company's Nominated Adviser, that the terms of the Loan Facility are fair and reasonable insofar as the Company's independent shareholders are concerned.  Mr Furness has not been involved in the consideration and approval of the Loan Facility by the Company's board of directors.

Capitalised Software Development Costs

As highlighted in our full year results and as part of the IPO process, the Group expects to invest heavily in product development over the next few years and therefore incur significantly higher costs in software development than in previous years.  Some of those costs are incurred through the Group's outsourced offshore development centre in Hanoi, Vietnam and some from a team based in the UK.  Where such work is expected to result in future revenue, costs incurred that meet the definition of software development in accordance with IAS38, Intangible Assets, are capitalised in the statement of financial position.  During the half year the Group capitalised £1.0m in respect of software development (2018: £0.25m).

Capital Expenditure

In addition to software development costs noted above, the Group's main ongoing capital expenditure commitment is maintaining and extending the geographic reach of the essensysCloud private network, and therefore, Connect.  During the half year the Group invested £0.3m specifically in expanding and upgrading that network in the US.  The Group incurred other capital expenditure of £0.3m related primarily to the completion of the establishment of the Group's West Coast US operation, internal systems upgrades and other network enhancements in the UK.

Alan Pepper

Chief Financial Officer

8 April 2020

Consolidated statement of comprehensive income for the six months ended 31 January 2020

	Note	Six months  ended 31 January  2020 £'000 (unaudited)	Six months ended 31 January 2019 £'000 (unaudited)
Revenue	3	11,407	9,591
Cost of sales		(4,195)	(3,716)
Gross profit		7,212	5,875
Administrative expenses		(7,216)	(6,126)
Other operating income		11	20
Operating profit / (loss)		7	(231)
Operating profit/(loss) analysed by:
Operating profit before share based payments and IPO costs		259	583
Share based payment expenses		(252)	(712)
IPO costs		-	(306)
Finance income		2	51
Finance expense		(90)	(234)
Loss before taxation		(81)	(414)
Taxation		(12)	5
Loss for the period		(93)	(409)
Other comprehensive loss
Exchange differences arising on translation of foreign operations		(184)	(10)
Total comprehensive loss for the period		(277)	(419)

Loss per share

Basic and diluted loss per share	4	(0.193p)	(1.05p)

 

Consolidated statement of financial position as at 31 January 2020

	Note	As at 31 January 2020 £'000 (unaudited)	As at 31 July 2019 £'000 (audited)
ASSETS
Non-current assets
Intangible assets	5	4,218	3,732
Property, plant and equipment	6	1,616	1,376
Right of use assets	7	2,456	3,119
Total non-current assets		8,290	8,227
Current assets
Inventory		498	292
Trade and other receivables	10	6,521	5,727
Cash and cash equivalents	10	1,720	2,688
Total current assets		8,739	8,707
Total assets		17,029	16,934
EQUITY AND LIABILITIES
Equity
Share capital	8	120	120
Share premium		13,184	13,184
Share based payment reserve		1,231	979
Merger reserve		28	28
Retained earnings		(5,595)	(5,318)
Total equity		8,968	8,993
Non-current liabilities
Lease liability	9	1,281	1,637
Deferred tax liabilities		114	67
Total non- current liabilities		1,395	1,704
Current liabilities
Trade and other payables	10	4,266	3,382
Contract liabilities		1,014	1,044
Lease liabilities	9	1,383	1,811
Current tax liabilities		3	-
Total current liabilities		6,666	6,237
Total equity and liabilities		17,029	16,934

 

Consolidated statement of changes in equity for the six months ended 31 January 2020

	Share capital £'000	Share premium £'000	Share based payment reserve  '000	Merger Reserve £'000	Retained  earnings £'000	Total £'000
Balance at 1 August 2018 (audited)	97	-	-	28	2,898	3,023
Comprehensive Income
Loss for the period	-	-	-	-	(409)	(409)
Currency translation difference	-	-	-	-	(10)	(10)
Total comprehensive loss	-	-	-	-	(419)	(419)
Transactions with owners
Share based payment expense	-	-	712	-	-	712
Balance at 31 January 2019 (unaudited)	97	-	712	28	2,479	3,316
Balance at 1 August 2019 (audited)	120	13,184	979	28	(5,318)	8,993
Comprehensive Income
Loss for the period	-	-	-	-	(93)	(93)
Currency translation difference	-	-	-	-	(184)	(184)
Total comprehensive loss	-	-	-	-	(277)	(277)
Transactions with owners
Share based payment expense	-	-	252	-	-	252
Balance at 31 January 2020 (unaudited)	120	13,184	1,231	28	(5,595)	8,968

 

Consolidated cash flow statements for the six months ended 31 January 2020

		Six months ended 31 January 2020 £'000 (unaudited)	Six months ended 31 January 2019 £'000 (unaudited)
Cash flows from operating activities
Loss before taxation		(93)	(414)
Adjustments for non-cash/non-operating items:
Amortisation of intangible assets		464	357
Depreciation of property, plant and equipment		299	163
Loss on sale of property, plant and equipment		-	18
Amortisation of right-of-use assets		839	794
Share based payment expense		252	712
Finance income		(2)	(51)
Finance expense		90	234
		1,849	1,813
Changes in working capital:
Increase in inventory		(206)	-
Increase in trade and other receivables		(794)	(1,415)
Increase/(decrease) in trade and other payables		826	(482)
Cash from/(used in) operations		1,675	(84)
Taxation received		31	10
Net cash from/(used in) operating activities		1,706	(74)
Cash flows from investing activities
Purchase of intangible assets		(950)	(228)
Purchase of property, plant and equipment		(591)	(30)
Interest received		2	51
Net cash used in investing activities		(1,539)	(207)
Cash flows from financing activities
Proceeds from bank loans		-	9,770
Repayment of bank loans		-	(4,662)
Bank and other interest paid		-	(101)
Repayment of lease liabilities		(1,057)	(938)
Interest on lease liabilities		(90)	(92)
Net cash (used in)/from financing activities		(1,147)	3,977
Net (decrease)/increase in cash and cash equivalents		(980)	3,696
Cash and cash equivalents beginning of period		2,688	882
Effects of foreign exchange rate changes		12	(12)
Cash and cash equivalents at end of period		1,720	4,566

Notes to the unaudited interim financial information

1.  Basis of preparation

The unaudited condensed interim financial information presents the consolidated financial results of essensys plc and its wholly owned subsidiaries (together, "essensys plc Group" or "the Group") for the six-month period to 31 January 2020.  This financial information has been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards as adopted by the European Union ("IFRS").  This financial information does not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 31 July 2019 Annual Report.  The financial information for the half year ended 31 January 2020 does not constitute statutory accounts within the meaning of Section 434 (3) of the Companies Act 2006 and both periods are unaudited.

The comparative financial information presented herein for the year ended 31 July 2019 does not constitute full statutory accounts for that period.  The statutory Annual Report and Financial Statements for the year ended 31 July 2019 have been filed with the Registrar of Companies.  The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 July 2019 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The Group has applied the same accounting policies and methods of computation in its interim consolidated financial statements as in its 2019 annual financial statements, except for those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2019 and will be adopted in the 2020 financial statements.  The new standard impacting the Group that will be adopted in the annual financial statements for the year ended 31 July 2020 is IFRIC 23 Uncertainty over Income Tax Treatments.  This new standard is not expected to have a material impact on the Group.

The principal accounting policies adopted in the preparation of the unaudited interim financial information are set out below. The policies have been consistently applied, unless otherwise stated. 

essensys plc is the Group's ultimate parent company.  It is a public listed company and is domiciled in the United Kingdom.  The address of its registered office and principal place of business is Aldgate Tower 7th Floor, 2 Leman Street, London E1 8FA.  essensys plc's shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

2.  Going Concern

The consolidated financial statements have been prepared on a going concern basis.  In reaching their assessment, the directors have considered a period extending at least twelve months from the date of approval of this half yearly financial report.

The directors continue to monitor developments with, and potential impact of, Covid-19 in the short and medium term and is in particular focussed on the key risks of: delays by customers in activation of existing contracted sites; near term delays in customer contracting decisions in respect of new sites; potential reduction in marketplace service utilisation; and the impact of the current situation on the financial stability of customers.

Following the implementation of the UK Government Stay at Home measures, the Group has implemented a number of measures to reduce operating costs and conserve cash, including:

· reduction of payroll costs from a number of personnel being placed on Furlough Leave, reduced working hours and senior management pay reductions;

· reduction in near term operating expenditure as a result of remote working and a lack of travel;

· Deferral of any non-essential operating and capital expenditure and a pause on all recruitment

· Consideration of government financial support schemes

The directors have prepared cash flow forecasts covering a period of at least 12 months from the date of releasing these interim financial statements.  This assessment has included consideration of the forecast performance of the business for the foreseeable future, the cash and financing facilities available to the Group and the mitigating actions undertaken to reduce the impact of Covid-19.  In preparing these forecasts, the directors have considered a number of sensitivities, including the potential impact of Covid-19.  The Group has secured the necessary supplies in order to meet its contracted commitments and anticipated demand and at 31 January 2020 had cash reserves of £1.7m together with an undrawn revolving credit facility.  Subsequent to the half year end the Group entered an agreement with Mark Furness (the Group's founder, CEO and largest shareholder) to provide a loan of up to £1.3m in the event that the Group has a requirement for additional liquidity.

Based on the sensitised cash flow forecasts prepared, the directors are confident that any funding needs required by the business will be sufficiently covered by the existing cash reserves, the undrawn revolving credit facility and the Loan Facility from Mark Furness.

 

Notes to the unaudited interim financial information

3.  Segmental reporting

The Group has one single business reportable segment and generates revenue largely in the UK and the US. The majority of the Group's customers provide flexible office facilities together with ancillary services (e.g. meeting rooms and virtual services) including technology connectivity.

The Group provides mission critical software-as-a-service ("SaaS") and Cloud services to the flexible workspace industry.  The Group's software is designed specifically to serve the specific requirements of flexible workspace providers, removing operational complexity and enabling them to operate more efficient, tech-driven spaces and businesses.

The Connect software-enabled-services platform allows flexible workspace operators to provision, manage and monitor, in real-time, all of the critical infrastructure, IT and tech services that they provide to their customers.  As part of providing this service, the Group also provides the technology infrastructure that supports these services.

The Group's Operate software platform is a comprehensive ERP platform for flexible workspace providers, allowing operators to more effectively and efficiently run their businesses day-to-day.

The Group generates revenue from the following activities:

-  Establishing services at customer sites (e.g. providing and managing installation services, equipment and providing training on software and services)

-  Recurring monthly fees for using the Group's platforms

-  Revenue from usage of on demand services such as internet and telephone usage and other, on demand, variable services.

-  Other ad-hoc services

The Group has one single business reportable segment which is the provision of software and technology platforms that manage their critical infrastructure and business processes, primarily to the flexible workspace industry.

The Group has two main revenue streams, Operate and Connect.  Given that support for both revenue streams is provided in such a way as to make cost and therefore operating performance impractical, the two revenue streams are combined into a single reportable segment.  The essensys plc Group's revenue per revenue stream is as follows: 

	Six months ended 31 January 2020 £'000	Six months ended 31 January 2019 £'000
Operate - workspace management software	943	670
Connect - software enabled infrastructure platform	10,464	8,921
	11,407	9,591

 

Notes to the unaudited interim financial information

3.  Segmental reporting (continued)

Revenue from customers greater than 10% in each reporting period is as follows:

	Six months ended 31 January 2020 £'000	Six months ended 31 January 2019 £'000
Customer 1	1,717	1,398
Customer 2	1,542	1,358
Customer 3	1,200	1,264

The Group operates in two main geographic areas, the United Kingdom and the United States of America. The Group's revenue per geographical area is as follows:

	Six months ended 31 January 2020 £'000	Six months ended 31 January 2019 £'000
United Kingdom	6,621	6,338
United States of America	4,786	3,253
	11,407	9,591

Group revenue disaggregated between revenue recognised 'at a point in time' and 'over time' is as follows:

	Six months ended 31 January 2020 £'000	Six months ended 31 January 2019 £'000
Revenue recognised at a point in time	1,686	1,867
Revenue recognised over time	9,721	7,724
	11,407	9,591

 

Notes to the unaudited interim financial information

3.  Segmental reporting (continued)

Contract asset movements were as follows:

	£000
At 1 August 2019	475
Transfers in the period from contract assets to trade receivables	(271)
Release of capitalised commission cost to the statement of comprehensive income	(55)
Excess of revenue recognised over cash (or rights to cash) being recognised during the period	157
Commission costs capitalised on contracts	127
At 31 January 2020	433
	£000
At 1 August 2019	1,044
Amounts included in contract liabilities that was recognised as revenue during the period	(843)
Cash received and receivables in advance of performance and not recognised as revenue during the period	813
At 31 July	1,014

Contract assets are included within 'trade and other receivables' and contract liabilities are shown respectively on the face of the statement of financial position.  Contract assets arise from the group's revenue contracts, where work is performed in advance of invoicing customers.  Contract liabilities arise where revenue is received in advance of work performed.  Cumulatively, payments received from customers at each balance sheet date do not necessarily equal the amount of revenue recognised on the contracts.  Commission costs capitalised on contracts represents internal sales commission costs incurred on signing of customer contracts and, in line with the requirements of IFRS15, spread over the life of the customer contract.

4.  Loss per share

The loss per share has been calculated using the loss for the period and the weighted average number of ordinary shares outstanding during the period, as follows:

	Six months ended 31 January 2020 £'000	Six months ended 31 January 2019 £'000
Loss for the period attributable to equity holders of Essensys Group	(93)	(409)
Weighted average number of ordinary shares	48,107,567	38,836,044
Loss per share	(0.193p)	(1.05p)

As the Group is loss making in both periods presented, the share options over ordinary shares have an anti-dilutive effect and therefore no dilutive loss per share is disclosed.

 

Notes to the unaudited interim financial information

5.  Intangible assets

		Customer	Internal software
		relationships	development	Software	Goodwill	Total
		£000	£000	£000	£000	£000
	Cost
	At 1 August 2019	335	4,461	280	1,263	6,339
	Additions	-	950	-	-	950
	At 31 January 2020	335	5,411	280	1,263	7,289
	Amortisation
	At 1 August 2019	217	2,162	228	-	2,607
	Charge for year	36	392	36	-	464
	At 31 January 2020	253	2,554	264	-	3,071
	Net book value
	At 31 January 2020	82	2,857	16	1,263	4,218
	At 31 July 2019	118	2,299	52	1,263	3,732

		Customer	Internal software
		relationships	development	Software	Goodwill	Total
		£000	£000	£000	£000	£000
	Cost
	At 1 July 2018	335	3,661	280	1,263	5,539
	Additions	-	800	-	-	800
	At 31 July 2019	335	4,461	280	1,263	6,339
	Amortisation
	At 1 July 2018	154	1,547	164	-	1,865
	Charge for year	63	615	64	-	742
	At 31 July 2019	217	2,162	228	-	2,607
	Net book value
	At 31 July 2019	118	2,299	52	1,263	3,732
	At 31 July 2018	181	2,114	116	1,263	3,674

 

Notes to the unaudited interim financial information

6.  Property, plant and equipment

		Fixtures and	Computer	Leasehold
		fittings	equipment	improvements	Total
		£000	£000	£000	£000
	Cost
	At 1 August 2019	186	4,763	133	5,082
	Additions	69	521	1	591
	Exchange adjustments	(11)	(120)	(3)	(134)
	At 31 January 2020	244	5,164	131	5,539
	Depreciation
	At 1 August 2019	120	3,513	73	3,706
	Charge for year	17	275	7	299
	Exchange adjustments	(5)	(75)	(2)	(82)
	At 31 January 2020	132	3,713	78	3,923
	Net book value
	At 31 January 2020	112	1,451	53	1,616
	At 31 July 2019	66	1,250	60	1,376

		Fixtures and	Computer	Leasehold
		fittings	equipment	improvements	Total
		£000	£000	£000	£000
	Cost
	At 1 July 2018	111	3,872	155	4,138
	Additions	42	665	15	722
	Exchange adjustments	33	226	(37)	222
	At 31 July 2019	186	4,763	133	5,082
	Depreciation
	At 1 July 2018	68	3,070	57	3,195
	Charge for year	36	376	14	426
	Exchange adjustments	16	67	2	85
	At 31 July 2019	120	3,513	73	3,706
	Net book value
	At 31 July 2019	66	1,250	60	1,376
	At 31 July 2018	43	802	98	943

 

Notes to the unaudited interim financial information

7.  Right of use assets

		Leasehold	Fixtures and	Computer	Leasehold
		property	fittings	equipment	improvements	Total
		£000	£000	£000	£000	£000
	Cost
	At 1 August 2019	4,362	142	2,815	584	7,903
	Additions	274	-	-	-	274
	Disposals	(91)	-	-	-	(91)
	Exchange adjustments	(125)	-	(95)	-	(220)
	At 31 January 2020	4,420	142	2,720	584	7,866
	Depreciation
	At 1 August 2019	2,260	99	2,265	160	4,784
	Charge for year	515	17	278	29	839
	Disposals	(91)	-	-	-	(91)
	Exchange adjustments	(51)	-	(71)	-	(122)
	At 31 January 2020	2,633	116	2,472	189	5,410
	Net book value
	At 31 January 2020	1,787	26	248	395	2,456
	At 31 July 2019	2,102	43	550	424	3,119

		Leasehold	Fixtures and	Computer	Leasehold
		property	fittings	equipment	improvements	Total
		£000	£000	£000	£000	£000
	Cost
	At 1 July 2018	3,393	167	2,716	584	6,860
	Additions	959	-	-	-	959
	Disposals	(99)	-	-	-	(99)
	Exchange adjustments	109	(25)	99	-	183
	At 31 July 2019	4,362	142	2,815	584	7,903
	Depreciation
	At 1 July 2018	1,290	75	1,642	102	3,109
	Charge for year	928	35	565	58	1,586
	Disposals	(38)	-	-	-	(38)
	Exchange adjustments	80	(11)	58	-	127
	At 31 July 2019	2,260	99	2,265	160	4,784
	Net book value
	At 31 July 2019	2,102	43	550	424	3,119
	At 31 July 2018	2,103	92	1,074	482	3,751

 

Notes to the unaudited interim financial information

8.  Called up share capital 

	As at 31 January 2020 No.	As at 31 July 2019 No.
Allotted, called up and fully paid
0.0025p ordinary shares	48,107,567	48,107,567
	31 January 2020 £'000	31 July 2019 £'000
Allotted, called up and fully paid
0.0025p ordinary shares	120	120

9.  Lease liabilities

		Leasehold	Fixtures and	Computer	Leasehold
		property	fittings	equipment	improvements	Total
		£000	£000	£000	£000	£000
	At 1 August 2019	2,444	86	620	298	3,448
	Additions	138	-	-	-	138
	Interest expense	51	7	18	14	90
	Effect of modification to lease terms	-	-	-	-	-
	Lease payments	(601)	(22)	(361)	(73)	(1,057)
	Variable lease payment adjustment	131	-	-	-	131
	Foreign exchange movements	(75)	-	(11)	-	(86)
	At 31 January 2020	2,088	71	266	239	2, 664

	Analysis by current and non-current:
		Leasehold	Fixtures and	Computer	Leasehold
		property	fittings	equipment	improvements	Total
		£000	£000	£000	£000	£000
	Due within a year	1,024	9	225	125	1,383
	Due in more than one year	1,064	62	41	114	1,281
		2,088	71	266	239	2,664

 

Notes to the unaudited interim financial information

10.  Financial instruments

Financial assets

Financial assets measured at amortised cost comprise trade receivables, other receivables, accrued income and cash, as follows:

	As at 31 January 2020 £'000	As at 31 July 2019 £'000
Trade receivables	3,530	3,019
Other receivables	313	910
Cash at bank and in hand	1,720	2,688
	5,563	6,617

Financial liabilities

Financial liabilities measured at amortised cost comprise trade payables, accruals, other payables, bank loans and lease liabilities, as follows:

	As at 31 January 2020 £'000	As at 31 July 2019 £'000
Trade payables	2,142	1,678
Other payables	639	117
Accruals	1,485	1,268
	4,266	3,063

The Group's activities expose it to a variety of financial risks:

• Market risk (including foreign exchange risk, price risk and interest rate risk)

• Credit risk

• Liquidity risk

The financial risks relate to the following financial instruments:

• Cash and cash equivalents

• Trade and other receivables

• Trade and other payables

Risk management is carried out by the directors.  The directors identify and evaluate financial risks and provide principals for overall risk management.

(a) Credit Risk

Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations.  The Group is mainly exposed to credit risk from credit sales.  It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts.

 

Notes to the unaudited interim financial information

10.  Financial instruments (continued)

(b) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises because the Group operates in the United Kingdom and the United States of America, whose functional currency is not the same as the presentational currency of the Group.  Foreign exchange risk also arises when individual companies within the group enter into transactions denominated in currencies other than their functional currency.  Such transactions are kept to a minimum either through the choice of suppliers or presenting sales invoices in the functional currency.

Certain assets of the group companies are denominated in foreign currencies.  Similarly, the Group has financial liabilities denominated in those same currencies.  In general, the Group seeks to maintain the financial assets and financial liabilities in each of the foreign currencies at a reasonably comparable level, thus providing a natural hedge against foreign exchange risk and reducing foreign exchange exposure to a minimal level.

 (ii) Interest rate risk

The Group's interest rate exposure arises mainly from the interest-bearing borrowings.  All the Group's facilities were floating rates excluding interest from leases, which exposed the group to cash flow risk.  As at 31 January 2020 there are no loans outstanding, and the overdraft facility is available but not in use.  Therefore, there is no material exposure to interest rate risk

(c) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash flows for operations.  The Group manages its risk to shortage of funds by monitoring forecast and actual cash flows.  The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

11.  Post balance sheet events

The global expansion of the Covid-19 virus since the half-year end has resulted in macroeconomic uncertainty, including in the Group's key markets of the UK and USA.  Whilst there has been no material impact on the Group as at the date of this interim financial information it is difficult to assess the short to longer-term impact of that uncertainty on the Group's operations.

The Group has secured its supply chain in order to meet its contracted commitments and anticipated demand and to date its customers have confirmed that they intend to continue with their existing site opening plans that relate to current contracted Connect sites as at the date of this interim financial information.

As at 31 January 2020 the Group had cash reserves of £1.7m together with an undrawn revolving credit facility.  On 8 April 2020 the Group entered into an unsecured loan agreement with Mark Furness (the Group's founder, CEO and largest shareholder) to provide £1.3m of additional funding in the event that the Group required it.

Given the mission-critical nature of the Group's software and services, the commitments that its customers have in terms of their own site delivery plans and the recurring and contracted nature of the majority of the Group's revenue, management continues to expect its customers to meet their financial commitments to the Group.

 

INDEPENDENT REVIEW REPORT TO essensys plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2020 which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity and the consolidated cash flows statements.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2020 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability

BDO LLP

Chartered Accountants

London, UK

8 April 2020

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

END

 

 

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